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Employees Cost More to Employ

The costs employers incur in addition to wages when employing people are the highest since records began.  Increases in annual leave and statutory holiday entitlements drove non-wage labour costs up 6.2 per cent in the year to the June 2006 quarter, Statistics New Zealand said today.  This was the largest annual increase since the series began in the December 1992 quarter.

The salary and wage rate component of the Labour Cost Index (LCI) rose 3.2 per cent between the June 2005 quarter and the June 2006 quarter, while the non-wage labour costs component rose 6.2 per cent, SNZ said.

The increase in the non-wage labour costs component of the LCI was partly driven by a 7.1 per cent increase in annual leave and statutory holiday costs. "The main reason for the increase in this cost is employers increasing their leave entitlement in anticipation of changes to the Holiday Act taking effect in April 2007," SNZ said.

Another contributor to the increase was a rise in the number of paid statutory holidays, from 10 to 11 days, due to Waitangi Day in 2005 falling on a weekday rather than a weekend.

Employer superannuation costs rose 6.6 per cent in the year to the June 2006 quarter, which also increased non-wage labour costs. Superannuation costs for the public sector rose 12.3 per cent, partly due to the increase in the contribution rate of the State Sector Retirement Savings Scheme.

In the year to the June 2006 quarter, workplace accident insurance costs rose 4.8 per cent, reflecting increases in pay rates and Accident Compensation Corporation levy rates.

The index for other non-wage labour costs, which includes medical insurance, automobiles available for private use, and employer-related low interest loans, rose 0.7 per cent. The cost of providing medical insurance and employer-related low interest loans fell, while the cost of providing vehicles available for private use rose.

Source:  Fairfax New Zealand Limited

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